The new Ontario 13% HST becomes effective on July 1, 2010. It is not too
early to start thinking about how harmonization will affect your business.
Here are some things that all businesses, not just Toronto Chartered
Accountants, need to consider as July 1 approaches:
- Accounting system needs to be changed by the corporate firm
accountant to accommodate the HST. New general ledger accounts need to be
set up. The new tax actually has 2 components, the 5% GST and the 8% HST.
If you are a charity, it is important to track these two components
separately, since the ITC refund is calculated only on the 8% HST portion.
In addition, the format of sales invoices needs to be modified to
incorporate the HST.
- Budgeting for HST: The impact of the introduction of HST on
budgets and cash flow will need to be evaluated. Previously unrecoverable
PST will now be recoverable as ITC's, reducing business costs after July
1. Cash flows will be affected due to the collection and remittance of HST
on a broader range of products than before. The impact of the time lag
between paying 13% HST on sales to the government and subsequent
collection of HST from customers will be much larger than the 5% GST
- Contracts: businesses will need to review existing contracts to
determine the impact of harmonization on these agreements. In particular,
any existing contracts that quote prices including taxes should be
renegotiated. New contracts being set up also need to be considered in the
light of HST.
- Planned expenditures: If possible, summer 2010 expenditures which
include PST should be deferred until after June 30 so that the provincial
component of the tax paid will qualify for an ITC and thus be refundable.
It may not be much of an issue for small expenditures, but anything with a
substantial dollar value should be deferred if at all possible, which
would result in a reduced total cost.
There are other issues affecting cross-border transactions and
transitional rules for specific transactions that straddle the July 1
startup date. Please contact us at 905-943-4046 if you need further
assistance or accounting services in the coming months. Click here for additional contact information
Ontario HST - Simkover and Associates Chartered Accountants